Ratio of Debt to Income

Your debt to income ratio is a formula lenders use to calculate how much money is available for a monthly home loan payment after all your other recurring debt obligations have been fulfilled.

Understanding your qualifying ratio

Usually, underwriting for conventional mortgage loans requires a qualifying ratio of 28/36. FHA loans are a little less strict, requiring a 29/41 ratio.

For these ratios, the first number is how much (by percent) of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including hazard insurance, HOA dues, PMI - everything that makes up the payment.

The second number is the maximum percentage of your gross monthly income that should be applied to housing costs and recurring debt. For purposes of this ratio, debt includes credit card payments, auto/boat loans, child support, and the like.

For example:

With a 28/36 ratio

  • Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
  • Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

  • Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
  • Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers on your own income and expenses, feel free to use our superb Mortgage Loan Qualification Calculator.

Guidelines Only

Remember these are just guidelines. We will be happy to help you pre-qualify to help you determine how much you can afford.

Selectplus Lending can walk you through the pitfalls of getting a mortgage. Call us at (818)645-7035.

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